EIA data likely showing crude oil stocks rising 2 million barrels – Platts

In addition to stronger than typical imports, crude stocks likely backstopped by expected reduction in US refinery run

Run cuts at many US refineries and strong imports likely kept US crude oil inventories well-supplied last week, according to an S&P Global Platts preview of this week’s pending US Energy Information Administration oil stocks data.

Gasoline stocks are expected to rise amid issues at multiple U.S. Gulf Coast fluid catalytic crackers (FCCs).

The oil complex faces a wave of hurdles that will likely keep prices in check this week, even after last week’s decision by OPEC members to cap production, an S&P Global Platts analysis showed Monday.

Prompt-month New York Mercantile Exchange West Texas Intermediate crude oil futures jumped around $3/b last Wednesday in the wake of the OPEC deal and even though the rally was short-lived, the price rise has largely held, with oil trading around $48.58/b early Monday afternoon.

But run cuts at many US  refineries and strong imports likely kept US crude oil stocks well-supplied last week. Gasoline stocks are expected to rise despite issues plaguing multiple US Gulf Coast FCCs.

These fundamentals — if borne out by U.S. Energy Information Administration data, which is set to be released Wednesday, will likely keep bulls at bay.

Analysts surveyed Monday by S&P Global Platts expect U.S. crude oil stocks to show a rise of 2 million barrels for the latest reporting week ended Friday. If so, this would be in line with the five-year average. Gasoline stocks are expected to have risen 500,000 barrels and distillate stocks to have fallen 1.7 million barrels.

Imports will likely play a big role, with weekly import figures greater than year-ago levels by more than 700,000 b/d during the past six weeks. Last week the US imported 7.84 million b/d. While down from 8.31 million b/d the week prior, US oil imports were up from the 7.55 million b/d registered for the same week a year ago.

Refining margins are also said to be favoring imports, particularly on the US Atlantic Coast. Bonny Light cracking margins in the region averaged $7.59/b last week, up from $5.89/b the prior week. This compares favorably to the $1.08-$1.24/b averaged for Bakken crude over the past two weeks.

On the Gulf Coast, coking margins for Mexican Maya and Western Canadian Select averaged $13.03/b and $12.89/b, respectively. That is better than coking margins for Mars, which averaged $11.50/b, and far better than cracking margins for Louisiana Light Sweet, which averaged $9.22/b.

In addition to stronger than seasonally typical imports, crude stocks will likely be backstopped by an expected reduction in US refinery runs. Analysts surveyed Monday by S&P Global Platts suggest U.S. refinery utilization rates could have fallen by 1 percentage point last week.

While refinery utilization rates fell this time last year, a reduction of the size expected would bring total US refinery utilization rates to 89.1 per cent of capacity, nearly 1 percentage point less than a year ago.

The cut in refinery utilization was likely aided by reduced rates at one of two fluid catalytic crackers at Phillips 66’s 146,000-b/d refinery in Borger, Texas, last week. Additionally, Marathon reported an upset in a crude unit at its 459,000 b/d Galveston Bay refinery in Texas City.

LyondellBasell also reported issues with its gasoline-making fluid catalytic cracking unit at its 263,776 b/d Houston refinery.

West Coast refinery issues continued, but history shows price implications in such cases are typically isolated to just local markets.

Phillips 66 confirmed Thursday it had started planned maintenance at its 259,000-b/d Los Angeles, California, refinery complex. Further, Chevron last week began a seasonal turnaround at its 243,000 b/d Richmond, California, refinery.

SAUDI OFFICAL SELLING PRICES EXPECTED

In addition to US oil inventory data, the market is surely eyeing Saudi Aramco’s official selling prices, which are expected to be released this week. Asia traders surveyed Friday said they expected slightly steeper cuts, essentially making Saudi crude oils even cheaper in Asia then they have already been.

If further cuts pan out, such will likely be taken by the markets as a sign the Saudis will continue to vie for market share. Further, it could be seen as running counter to the takeaway from last Wednesday’s OPEC meeting, which saw member nations agreeing to an output cap.

That said, firm production allocations are not expected to be decided until the November 30 OPEC meeting, which would give Saudi Arabia nearly two months to change course.

THIS WEEK’S MACRO OUTLOOK

Oil market players will also pay attention to several notable economic indicators that will be published this week: The U.S. Institute for Supply Management’s Manufacturing Purchasing Managers Index (ISM PMI), which in Sept. came in strong at 51.5, up from 49 in Aug. and beating economists’ expectations of 50.3. ISM PMI is a leading indicator of US manufacturing and US economic performance.

However, the US employment data could act as a counter weight. ADP nonfarm payroll data is expected to show rise of 169,000 jobs in Sept., less than the 177,000 added in Aug. Meanwhile, US Nonfarm Payrolls for Sept. are expected to grow 172,000 jobs, up from the Aug. rise of 151,000. If so, this would leave US unemployment flat at 4.9 per cent.

“Weekly jobless claims have fallen since August,” he said. “The [U.S. Bureau of Labor Statistics] BLS data found about 50,000 more people than average missed work in August due to the weather. Most of these should be expected to have returned,” said Brown Brothers Harriman analyst Win Thin.